Hello,
This is Kyusung Lee, attorney at Weon Law.

After graduating with honors from the prestigious Hotchkiss School in Connecticut and Brown University with a degree in Economics, I began my career in the United States, gaining firsthand exposure to diverse cultures and languages.

Subsequently, I qualified as an attorney in Korea and built my expertise through roles such as a certified startup lawyer under the Korean Bar Association and working with the legal team of a large corporation.

Now, as a partner attorney at Weon Law, I provide tailored solutions to clients in areas like drafting English contracts and corporate legal advisory.

Today, I’d like to share insights on the importance of governing law in international contracts and how it is determined. If you’d prefer a consultation before diving into the details, feel free to reach out to me directly.

Contact Attorney Kyu Sung Lee 
T. 02-6264-7604

E. kslee@weonlaw.co.kr

Why Is Governing Law Important in International Contracts?

In domestic contracts between Korean companies, Korean law naturally serves as the basis for resolving disputes.

However, when the contracting parties are from different countries, the question arises: which country’s laws should govern the terms of the contract and their legal validity?

The legal framework that serves as the basis for interpretation and application of the contract is known as the governing law. Typically, the governing law is chosen as the law of one party’s country or that of a neutral third country.

The significance of governing law in international contracts lies in the fact that the outcome can vary substantially depending on which country’s laws are adopted and applied to the contractual relationship.

In other words, the choice of governing law can impact the interpretation and enforcement of the contract, making it essential to carefully decide on the governing law during the drafting process.

How Is Governing Law Determined in International Contracts?

Governing law is primarily determined by mutual agreement between the contracting parties. It can be the law of one party’s country, the other party’s country, or even a neutral third country.

However, when choosing the law of the other party’s country or a third country, it can be challenging to fully understand the legal provisions and their enforceability. This can place a party at a disadvantage during a dispute.

Therefore, it is highly recommended to agree on applying your own country’s law as the governing law whenever possible. Engaging an attorney during this process can help facilitate smoother negotiations and drafting.

On the other hand, if the contracting parties fail to agree on the governing law, it will be determined based on private international law (conflict of laws).

This can make the process significantly more complex, which is why it is better to agree on the governing law during the contract negotiation stage.

That said, there are cases where relying on the governing law of the other party’s country or a neutral third country may be more advantageous than defaulting to private international law.

What to Do If the Chosen Governing Law Puts You at a Disadvantage

If you believe that the governing law mutually agreed upon by the parties puts one side at a disadvantage, it is crucial to seek legal assistance immediately.

In such cases, it may be wise to incorporate specific provisions of international norms such as the ICC (International Chamber of Commerce) Incoterms or the CISG (United Nations Convention on Contracts for the International Sale of Goods) as governing principles for specific aspects of the contract. These might include shipping terms, freight conditions, liability for damages, or principles of risk allocation.

Today, I’ve introduced the importance of governing law in international contracts, how it is determined, and the steps you can take if the chosen governing law is unfavorable. I hope this information helps you in drafting English contracts for international transactions.

However, the practical application often differs from theoretical knowledge. As such, I recommend consulting with an attorney in advance, rather than handling the process internally within the company.

Should you have any questions or require assistance, please do not hesitate to contact me.

Kyusung Lee
Partner Attorney, Weon Law Firm
Phone: + 82 2 6264 7604
Email: kslee@weonlaw.co.kr